In China and India people are being lifted out of poverty at great rates, but you may have noticed the west is going backwards, with the wealthy becoming super-wealthy whilst an indebted middle class is hollowed out, and slowly but surely joining the poor?

The process began after the Progressive Era (1890 to 1920).

The mechanism’s pretty evident in the following chart, but the chart doesn’t give the full story, because in the early days of the income tax, at least high rates of income tax on upper incomes caught some economic rent/unearned income. However, Ronald Reagan and Margaret Thatcher were convinced to the ideas of Ayn Rand, and high rates of income tax on big incomes were abolished. Naturally, rent-seeking began to grow, and finance, insurance and real estate (the FIRE sector) was no longer our servant.

And so capitalism morphed into rentierism, a system in which extracting unearned incomes is seen as equally important to being productively employed. In fact, tax regimes grant favoured treatment to rent-seekers that are unavailable to workers.

Socialism’s not the answer, however. The only thing that needs to be socialised are unearned incomes. In the Progressive Era, people knew this because Henry George had explained it simply in “Progress and Poverty” and they’d listened. Today, Karl Marx is better-known than Henry George, and we are told that capitalism is better than communism. That’s true, but there is an alternative. This ain’t capitalism.

It’s rentierism, pure and simple – and it needs fixing.

By Bryan Kavanagh

The “Kavanagh-Putland Index” (KPI-2009) measures Australia’s estimated total real estate sales as divided by its GDP. It has proven to be a simple yet effective predictor of economic recession, whether in its earlier life as the “Barometer of the Economy” (1991) which had included unadjusted calendar-year sales in the case of Victoria, or in its reincarnated KPI form as produced by Dr Gavin Putland. The effect of Putland’s adjustment of Victorian sales to financial years has been to move the notional real estate bubble line from 19%, towards 15%. (For those interested in the Kondratieff wave, the upward trend in the index actually reflects the downward half of the current K-Wave.) The 2-yearly change in the index has now crossed the damning -25% line in 2018, and presages economic recession in the 2019-20 financial year.

Together with Dr Putland’s “Trickle-up chart”, the KPI is a unique graph in the world of economics, underpinning the case for economic reform argued by Prosper Australia.

“This is a brilliant presentation on Australia’s bubble-driven economy, from the first bust in 1974 through to today’s, at a far higher household debt level than 45 years ago. Highly recommended. Check it out, Bill Shorten.”  – Professor Steve Keen, 17 January 2019

Although the KPI has been picked up by independent and heterodox financial analysts, it appears mainstream media is avoiding it because it essentially points to the need for greater capture of economic rent and less reliance on taxing wages.

It represents a major challenge to banking and wealthy rent-seeking interests, even though it has been advocated by classical economists from Adam Smith, David Ricardo, John Stuart Mill and Henry George to modern economists such as Mason Gaffney, Michael Hudson and Fred Harrison. This might be quite a change, but we were there in the Progressive Era (1890-1920), when land-based ‘taxes’ (economic rents) were some 50% of all taxation and income taxes were less than 10% – and we could gradually get there once again.

The state of today’s world economies clearly attests to the fact it’s time to implement the 2010 recommendations of Australia’s Future Tax System, the “Henry Tax Review”. If Australia were to do so, it might again lead the world in economic justice, as once it did, along with New Zealand.

“There’s not enough economic rent”? Nonsense! say cases put by John Locke to Mason Gaffney and Joseph Stiglitz which show that taxes come out of rent anyway, so why not put the charge there in the first instance, without all the deadweight loss the world has experienced through private rent-seeking?

No? – Pray tell why not?

….. but is she just sticking it to union-controlled super-funds?

…. and some Treasurers can’t!

The Rudd-Swan government, presumably at Hank Paulson’s urging, spent more than $50 billion keeping the great Australian housing bubble inflated.

Remember? $900 to everybody; the pink batts; new school buildings ….., &c.

It worked! But it sent our land bubble skyward for an even greater bursting – and it looks like it’s about to happen ….

The 2018 K-P Index out–out shortly–should be able to confirm!

William Butler Yeats (1865-1939)

       THE SECOND COMING

    Turning and turning in the widening gyre
    The falcon cannot hear the falconer;
    Things fall apart; the centre cannot hold;
    Mere anarchy is loosed upon the world,
    The blood-dimmed tide is loosed, and everywhere
    The ceremony of innocence is drowned;
    The best lack all conviction, while the worst
    Are full of passionate intensity.

    Surely some revelation is at hand;
    Surely the Second Coming is at hand.
    The Second Coming! Hardly are those words out
    When a vast image out of Spiritus Mundi
    Troubles my sight: a waste of desert sand;
    A shape with lion body and the head of a man,
    A gaze blank and pitiless as the sun,
    Is moving its slow thighs, while all about it
    Wind shadows of the indignant desert birds.

    The darkness drops again but now I know
    That twenty centuries of stony sleep
    Were vexed to nightmare by a rocking cradle,
    And what rough beast, its hour come round at last,
    Slouches towards Bethlehem to be born?

~~~~~~~~~~~~~~~~~~~~~

Henry George’s quote, at the peak of the 1880s Australian land bubble

“In the colonies [of Australia] I have been through, the curse of land monopoly and land speculation is over everything. I don’t know of any new country where more striking instances of the absurdity and injustice of our present treatment of land is to be seen.”

• Adelaide Observer, 26 April 1890